What would be the solution for 31-32 and what is the explanation behind the solution?
Selected assumptions for 2015:
9% Cost of goods sold/Sales
$6,288 Income Statement
Balance Sheet Actual Actual Forecast Forecast
2014 2014 2015
Sales $1,000
Cash $100
Cost of goods sold $600
Accounts Receivable $200
Operating expense $200
Inventory $500
Depreciation expense $100
Total Current Assets $500
EBIT $100
Net PP&E $1,000
Interest expense $35
Pre-tax income $65
Tax $26
Accounts Payable $300
Net Income $100
Bank loan $100
Total Current Liabilities $400
Long-Term Debt $400
Shareholders' Equity $1,000
Total Liabilities & Equity $1,800
Please refer to the spreadsheet above. Selected assumptions are given for preparing pro forma financial statements for 2015. Assume that no new equity will be issued in 2015. When the pro formas are completed, which of the following formulas would correctly give the forecast for shareholders' equity in cell G19?
A) F19 + B4 * C16
B) F19 * B2
C) F19 * 1 + B2
D) F19 + 1 - B4 * C16
E) None of the above
31)
32) Which of the following statements is correct if a firm's pro forma financial statements project net income of $12,000 and external financing required of $5,000?
A) Dividends cannot exceed $10,000.
B) Retained earnings cannot grow by more than $12,000.
C) Long-term debt cannot grow by more than $5,000.
D) Total assets cannot grow by more than $10,000.
